Looking to Defer Capital Gains Taxes? Don’t Overlook the 1031 Exchange!

There has been a lot of recent excitement surrounding the new Qualified Opportunity Zones as a method for deferring capital gains taxes. But be careful not to overlook the 1031 exchange – which is often a more tax-advantageous tool for real estate investors. In this article, we are going to talk about how to utilize the 1031 exchange to your advantage to save money on capital gains taxes.

The Origins of the 1031 Exchange

While Opportunity Zones are a brand new tax-deferral method, 1031 exchanges have been around for decades – originating before the Great Depression. Section 1031 is a part of the Internal Revenue Code and was developed to help spur the economy by incentivizing investment.

1031 Exchanges are Not Going Anywhere

Opportunity Zones are the shiny new thing that everyone is chasing – and they do provide great benefits in specific situations. But 1031 exchanges are often more versatile and can provide more long-term tax benefits. 1031 exchanges have been around for a long time and show no signs of going anywhere (having been preserved in the recent tax overhaul).

CPEC1031, LLC

Need help with your next commercial real estate transaction? Look to the pros at CPEC1031! Our team is ready and able to get you ready for the closing table and make sure you’ve got all your bases covered. Contact us today to learn more about the extent of our services and how we can help you. Our primary offices are located in downtown Minneapolis but we facilitate commercial transactions across the United States as well.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

The 45 Day Identification Period in a 1031 Exchange

Identifying replacement property is an important aspect of any 1031 exchange. In this article, we are going to discuss the relevant rules and tips for identifying replacement property in a 1031 exchange.

Identification Rules

Any replacement properties received within the 45 day identification period are deemed to have been identified. Replacements received after the 45th day must be properly identified in writing during the 45 day identification period. You only need to satisfy one of these rules :

• 3-PROPERTY RULE: Identify three or fewer replacements. Most common Identification rule utilized.

• 200% RULE: Identify any number of replacements; however, the total value of those properties identified may not exceed 200% of the value of your relinquished property.

• 95% RULE: Identify any number of replacements as long as you end up receiving at least 95% of the value of all properties identified. Note: This rule is not used very often.

Consequences of Conducting a Partial Exchange and Receiving a Portion of the Proceeds or Other Property

If you receive money or non like-kind property (“boot”) in an exchange on which you realize a gain, you have a partially nontaxable exchange. You are taxed “dollar for dollar” on the gain you realize, but only to the extent of the money and the fair market value of the non like-kind property that you receive.

Need Help With Your Commercial Transaction?

Are you struggling with the details of your commercial real estate transaction? We’re here to help. The experts at CPEC1031 have decades of experience in the commercial title industry. Our team consists of underwriters, title closers, escrow agents, and more who are ready to guide you through the specifics of your transaction. Reach out to us today at our office in downtown Minneapolis to learn more about our services, capabilities, and how we can help you through the details of your transaction.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

How to Report a 1031 Exchange of Real Estate on Your Taxes

With tax season approaching, many taxpayers have questions about what they need to report and how they should go about doing so. This is especially true for taxpayers who have conducted a 1031 exchange in 2018. In this article, we will discuss how to appropriately report your 1031 exchange when you file your taxes for 2018.

Use Form 8824

First, to state the obvious. Yes, you do need to report your 1031 exchange to the IRS. You do so via form 8824, which tells the IRS where the net proceeds from your 1031 exchange went. When you sell a property, your title company or closing agent is required to report that to the IRS via form 1099. Filing form 8824 explains to the IRS that this sale was a 1031 exchange transaction.

Click on the link below to get a copy of form 8824:

• Form 8824

Consult with Your CPA

You should consult with your CPA on all of this. If you haven’t already, inform them of your 1031 exchange and they will be able to help you report it in your tax filing. In fact, it’s a good idea to involve your CPA in the 1031 exchange process early on. They know your tax situation better than anyone and can advise you on how an exchange will impact your tax situation.

Get the Help You Need with Your 1031 Exchange

If you need help with the tax reporting requirements of your 1031 exchange – or anything else related to your like-kind exchange – contact CPEC1031, LLC today. Our qualified intermediaries have more than two decades of experience facilitating exchanges in all industries. We have the knowledge and expertise needed to walk you through your exchange. Contact us today at our office in downtown Minneapolis to set up a time to chat with one of our qualified intermediaries about your exchange.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

Why You Should Consider a 1031 Exchange in 2021

1031 exchanges of real estate are alive and well. If you’ve been thinking about doing a 1031 exchange of your real property, 2021 may be the year for you. In this article, we are going to talk about why you should consider doing a 1031 exchange in 2021.

Defer Your Taxes!

The greatest benefit of a 1031 exchange is that you are able to defer your capital gains taxes on the sale of your property. There are, of course, a few caveats that come with this. You need to reinvest your net proceeds into a property that is greater than your relinquished property in value, equity, and debt; you need to complete the transaction within 180 days; all property needs to be like-kind and needs to be used for a qualifying purpose.

Keep Your Money Working For You!

In a 1031 exchange, you reinvest your sales proceeds from your relinquished property into a bigger replacement property. In essence, you’re taking money that would have otherwise gone to the government in capital gains taxes and instead keeping that money working for a you in a continued investment. This has the dual benefit of spurring economic growth and incentivizing taxpayers to keep reinvesting in the market.

Minnesota 1031 Exchange Company

The qualified intermediaries at CPEC1031, LLC have more than two decades of experience facilitating exchanges. Our intermediaries can help you through each and every stage of your 1031 exchange – from the sale of your relinquished property to the closing of your new replacement property. Contact us today to set up a time to speak with one of our qualified intermediaries about your 1031 exchange. Our primary office is located in downtown Minneapolis, but we work with clients throughout the state of Minnesota, and across the country.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved

How to Save a Failing 1031 Exchange

When a 1031 exchange fails, it may seem like the end of the world. But don’t give up! There are options for salvaging a 1031 exchange. A popular option for rescuing a failed 1031 exchange is the Deferred Sales Trust. In this article, we are going to talk about how a Deferred Sales Trust (or DST for short) can help you rescue a failed 1031 exchange of real estate.

Avoiding a Failed 1031 Exchange

The first thing you want to do is take all the necessary precautions to avoid a failed 1031 exchange in the first place. The best way to do that is to begin preparations for your 1031 exchange well in advance and to involve a qualified intermediary early in the process.

Most 1031 exchanges fail because the taxpayer receives taxable boot during the process, fails to complete the exchange within the 180 day deadline, or does not accurately identify their replacement property. An intermediary can help you avoid all of these costly errors.

The Deferred Sales Trust Alternative

Even if your exchange fails, you are not completely out of luck. Converting your failed 1031 exchange into a Deferred Sales Trust is a great alternative method for deferring your taxes on the sale of real estate.

Hire a Qualified Intermediary

Hiring a qualified intermediary is an essential first step in any 1031 exchange. At CPEC1031, LLC, our intermediaries have more than two decades of experience working with taxpayers conducting 1031 exchanges of real estate. We can help you prepare for your exchange by putting together the necessary documents and answering all of your questions. Contact us today to learn more about how we can help you defer taxes on the sale of your real property. Our primary office location is in downtown Minneapolis, but we work with clients throughout the state of Minnesota and across the United States.

• Start Your 1031 Exchange: If you have questions about 1031 exchanges, feel free to call me at 612-643-1031.

Defer the tax. Maximize your gain.

© 2021 Copyright Jeffrey R. Peterson All Rights Reserved